Economics of World War II: The Air-Sea Super Battlefield

World War II ended 75 years ago in 1945. 

Stephen Broadberry and Mark Harrison have edited an ebook that offers an overview of some economic research on this topic: The Economics of the Second World War: Seventy-Five Years On (May 2020, CEPR Press, free registration required). The ebook has short readable chapters that link to the underlying specialized research. I was struck by a comment from their introduction:

Mobilisation for the Second World War was more extensive than for the First. The First World War was fought on land in Europe and the Near East and at sea in the Atlantic, while the Second was expanded to Asia and the Pacific, and to the air. While the major economies mobilised 30-60% of their national incomes for the First World War, the Second demanded 50-70%. Both wars reached the limit of what was sustainable for a modern economy at the time. The human losses were also greater: more than 50 million in the Second World War compared with 20 million or more in the First ... 

I'll append a full table of contents for the book below. Here, I'll focus on two chapters that particularly caught my eye, both of which focus on the importance of production of specialized equipment as central to the outcome of World War II. 

Phillips Payson O’Brien contributes an essay on "How the War Was Won." He suggests that histories of World War II have tended to focus on specific battles, like Stalingrad. Instead, he argues that the more fundamental war was what he calls the Air-Sea Super Battlefield: "Looking at the war this way allows us to reframe our understanding of what a battle was in the Second World War. Instead of battles being fixed on well-known pieces of earth, air-sea weaponry was constantly in action in battlefields thousands of miles long and many miles in depth – what should be called the Air-Sea Super Battlefield. Victory in this super-battlefield led to victory in the war."

More specifically, the Air-Sea Super Battlefield was not just a matter of battles in the air or the sea. Before that, it was a battle over the ability to put such resources into battle in the first place. O'Brien writes:

If we reframe the discussion of the war to look not only at what equipment was made but also at how it was destroyed, it emerges that the war was decided far from the land battlefield (O’Brien 2015). The most striking sign of this is how little war production went to the land war and how much went to the combined air-sea war. This was the case for all the powers except the USSR. ... 

Instead of waiting to destroy Axis equipment on the traditional battlefield, Allied air-sea weaponry destroyed it en masse before it could ever be used in action, determining the result of every ‘battle’ long before it was fought. This destruction of equipment is best understood in three phases. First, there is pre-production destruction, which prevented weapons from being built. This was done most efficiently to both Germany and Japan by depriving them of the ability to move raw materials. By 1942, both Germany and Japan had assembled large, resource-rich empires that had the ability to significantly increase weapons output. ... By the second half of 1944, attacks on the movement of goods throughout the Japanese and German economies meant that the amount of war equipment each could build was far below potential (Mierzejewski 2007: 106-113).

The second phase is direct production destruction – destroying the facilities to make weapons in Germany and Japan. This was the great hope of inter-war airpower enthusiasts for the precise targeting of individual munitions factories (Meilinger 1997: 1-114). During the war, there was an expectation that attacking specific industries such as German ball-bearing production would cripple weapons output. The truth was that these attacks were not as effective as hoped for, as strategic bombing was not accurate enough to completely wipe out facilities (until 1944). That being said, the losses from bombing were greater than those arising in land battles. The surprise is that land battles destroyed little equipment. German armour losses during the Battle of Kursk amounted to approximately 0.2% of annual output (and moreover was made up of mostly obsolete equipment) (O’Brien 2015: 310-311).

Finally, there were deployment losses. Getting weapons from the factory to the front was no easy feat. It normally required movement over hundreds or thousands of miles using shipping or rail lines that were vulnerable to attack. Aircraft had to be flown, often by inexperienced pilots, over the open ocean in or through difficult weather conditions. By 1943, as Anglo-American aircraft deployment losses decreased, Axis losses skyrocketed. This was because of the stresses placed on their systems by Allied air-sea power. German and Japanese pilot training was cut back as both ran out of fuel; hastily constructed new factories were producing more aircraft with undiscovered flaws; maintenance facilities at the front were poorly supplied. This meant that the Axis were losing as many aircraft deploying to the front as in direct combat. At times, Japan’s losses outside combat were up to twice those lost fighting (O’Brien 2015: 405-7).

Overall, by 1944 the Axis could deploy only a small fraction of their potential military capacity into combat – it was being destroyed in a multi-layered campaign long before it could be used against their enemies. This was the true battlefield of the Second World War, a massive air-sea super battlefield that stretched for thousands of miles not only of traditional front but of depth and height.

This emphasis on military equipment leads naturally to the US economy and its role as a supplier not just of soldiers, but also of manufactured production. Price Fishback focused on that story in "The Second World War in America: Spending, deficits, multipliers, and sacrifice." He writes:

The US war economy was a quasi-command economy in which the government forced 10% of the workforce to join the military at compensation levels well below normal wages. The military had the first claim on all resources, as over 36% of estimated GDP was devoted to the production of war goods that would be destroyed, left behind, or mothballed. Production halted on automobiles, civilian housing, and most consumer durables. The military also had first claim on the materials for clothing, food, and other factors. This led to rationing of meat, gasoline, fuel oil, kerosene, nylon, silk, shoes, sugar, coffee, processed foods, cheese, and milk. ...

The war-time production that made the US economy ‘the arsenal of democracy’ was a tremendous accomplishment. In a very short time span, the US economy produced 17 million rifles and pistols, over 80,000 tanks, 41 billion rounds of ammunition, 4 million artillery shells, 75,000 vessels, nearly 300,000 planes, and many more items and services for the war. ... In the last year of the war, 18% of the combined civilian and military labour force were in the military and another 22% were producing munitions.

Although output of the US economy rose dramatically during the World War II years, the increase went entirely to the war effort, so consumers as a group--and of course with some exceptions--were actually worse off.

Consumption per capita measured with official prices shows no change in private consumption between 1941 and 1944 but the estimate does not account for the declines in quality of goods, the extra costs of obtaining rationed goods, and the complete absence of other goods. Once the consumption figures are adjusted to develop better estimates of the true prices, the amount consumed per person was lower throughout the war than it was in 1940 when the economy was still climbing out of the Great Depression.

Despite the sacrifices, many remember the war as prosperous relative to the Depression because everybody had a job and developed a sense of shared sacrifice to defeat the Axis. Some individuals did fare better. Blacks migrated north and west to better jobs. Industrial demand for women’s services rose during the war; despite a post-war fall, it remained higher than in 1941 (Shatnawi and Fishback 2018). With little to buy, people accumulated wealth through savings or bought existing housing, which fuelled the post-war boom delayed by the war.

Fishback also offers some discussion of the controversy over the extent to which government spending was "crowding out" the rest of the economy. Apparently there was an argument back in the mid-1940s that wartime levels of taxation and spending were needed to keep the US economy going after the war; conversely, the warning was that a reduction in US government spending would lead to a return to the Depression years. One can rephrase this argument as a belief that government spending had not been crowding out the private sector. When government wartime spending fell sharply, there were some difficulties with the transition back to civilian production, and there was an eight-month postwar recession in 1945. But the US economy did not return to the Depression, which suggest that wartime spending was indeed "crowding out" private consumption.

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Table of Contents:

"Introduction," by Stephen Broadberry and Mark Harrison

Part I: Preparations for war

1 "Roots of war: Hitler’s rise to power," by Hans-Joachim Voth
2 "The German economy from peace to war: The Blitzkrieg economy revisited," by Richard Overy
3 "The Soviet economy and war preparations," by Mark Harrison
4 "Lessons learned? British economic management and performance during the World Wars," by Stephen Broadberry

Part II: Conduct of the war

5 "How the war was won," by Phillips Payson O’Brien
6 "Never alone, and always strong: the British war economy in 1940 and after," by David Edgerton
7 "The Second World War in America: Spending, deficits, multipliers, and sacrifices," by Price Fishback
8 "Economic warfare: Insights from Mançur Olson," by Mark Harrison
9 "Supplier networks as a key to wartime production in Japan," by Tetsuji Okazaki
10 "Exploitation and destruction in Nazi-occupied Europe," by Hein Klemann
11 "The economics of neutrality in the Second World War," by Eric Golson
12 "Economists at war," by Alan Bollard

Part III: Consequences of the war

13 "The famines of the Second World War," by Cormac Ó Gráda
14 "Inequality: Total war as a great leveller," by Walter Scheidel
15 "Recovery and reconstruction in Europe after the war," by Tamás Vonyó
16 "How the war shaped political and social trust in the long run," by Pauline Grosjean